AS HE PREPARES to serve a three- year prison term for fraud and conspiracy, James McDougal is hardly an ideal witness against President Clinton, but his testimony has breathed new life into the Whitewater investigation and should send a chill through the White House.

Not that McDougal's word alone is so convincing; after all, he is a convicted felon and an admitted liar.

Far more serious is independent counsel Kenneth Starr's evaluation that McDougal's help has led to a "fuller, broader, deeper understanding" of evidence in the probe of the Clintons' Whitewater connection. Starr said much of what McDougal has told investigators has been corroborated by documents or other witnesses.

A former Clinton pal and Whitewater business partner, McDougal faced a possible 84 years behind bars for 18 felony convictions, until Starr intervened with a federal judge in Little Rock seeking leniency in exchange for McDougal's version of White water related matters.

In sworn testimony videotaped and played at McDougal's criminal trial last year, Clinton said he had nothing to do with an illegal $300,000 loan and was not present at a meeting where the loan was allegedly discussed, as claimed by convicted felon David Hale. Hale claims he was at the meeting along with the president and McDougal.

McDougal, who had previously denied Clinton was at the meeting, explained why he has changed his story. "I just got sick and tired of lying for the fellow," he said.

It has been a busy week in Little Rock, where newly energized Whitewater prosecutors reached into the White House inner circle to subpoena chief of staff Erskine Bowles to testify before a federal grand jury about whether he tried to buy the silence of Webster Hubbell, another Clinton intimate at the center of Whitewater.

Bowles denied seeking hush money.

The tangled Whitewater web appears to be unraveling, but the whole story of the Clintons' involvement remains to be seen.

Asked if he had betrayed his former friends, McDougal answered: "I don't think so. I think the Clintons are really sort of like tornadoes moving through people's lives . . . I'm just one of the people left in the wake of their passing by there."